1. ICT-PSP Reporting / payments
Willy Van Puymbroeck
23 June 2011

2. Overview
ICT-PSP Payments – essentials (excluding ‘lump sum’ Thematic Networks)
Business workflow
Periodic reporting including financial statements
Costs level
Submission of the periodic report by the coordinator
Payment modalities
Certification of financial statements (CFS)
Controls and audits
Some best practices
‘Lump sum’ Thematic Networks

3. Payments in ICT-PSP- Essentials (excluding ‘lump sum’ Thematic Networks)
Basic principles
Cost reimbursement
Eligible and non-eligible costs
No-profit and co-financing
Direct Cost
Indirect Cost
Reimbursement rate
Maximum Union contribution
Requested Union contribution

4. Essentials Some legal references
Article II.4 sets the reporting obligations
Reporting periods are defined in Article 4 of the core grant agreement – includes the submission of individual financial statements
Article II.5 sets the approval of reports and deliverables, time-limit for payments
Includes the payment of interest by the Commission in case of late payments
Article II.28 sets the frame for financial audits
During the project and up to five years after the date of final payment.
Article II.29 sets the frame for the technical review
During the project and up to five years after the date of final payment

5. Essentials Eligible costs
Actual
Incurred by the beneficiary
Incurred during the duration of the project …
Determined in accordance with its usual accounting and management principles
Necessary for the implementation of the project
Recorded in the accounts of the beneficiary
Indicated in the indicative breakdown of the budget

6. Essentials Non-Eligible costs
Costs of capital employed
Provisions for possible future losses or charges
Interests owned
Exchange losses
Provisions for doubtful debts
Resources made available to a beneficiary free of charge
Value of contributions in kind
Unnecessary or ill-considered expenses
Marketing, sales and distribution costs for products and services
Indirect taxes and duties, including VAT*
Entertainment or hospitality expenses**
Any cost incurred or reimbursed in respect of, in particular, another Community, international or national project
* Unless the beneficiary can show that it is unable to recover it
** Except reasonable expenses accepted by the Commission as being absolutely necessary for carrying out the project

7. Essentials No-profit and co-financing
The Community contribution may not give rise to any profit for any beneficiary … For each beneficiary, the Community contribution may not exceed the total costs minus the receipts of the project (see Art. II.25.3)

8. Essentials Indirect costs and funding rate
Pilots
Indirect costs: flat rate of 30% of personnel costs*
Funding rate: 50% of eligible costs
Best Practice Pilots
Indirect costs: No indirect costs
Funding rate: 80% of eligible costs
* For calls 2007 and 2008 actual indirect costs could be used

9. Essentials Reporting requirements
During the project
Periodic report (within 60 days of the end of each reporting period defined in Article 4) including the last reporting period
Deliverables identified in Annex I
End of the project (within 60 days)
Final Report, including publishable summary covering results, conclusions and socio-economic impact of the project
After receiving the final payment (within 30 days)
Report on the distribution of the EU financial contribution between beneficiaries

10. Essentials Payment modalities
The Commission shall evaluate the project reports and deliverables … and disburse the corresponding payments within 105 days .. unless the time-limit, the payment or the project has been suspended
Payments shall be made after the Commission’s approval of the reports and/or deliverables
The Commission may proceed with an interim payment in part if some reports or deliverables are not submitted as required, or are only partially or conditionally approved
The total amount of pre-financing and interim payments shall not exceed 90% of the maximum Community contribution
The payments of the Commission shall be regarded as having been effected on the date on which the Commission’s account is debited
On expiry of the time limit for approval of the reports … the beneficiaries shall be entitled on late interest payment …
Payment to the coordinator on behalf of the beneficiaries

11. Business workflow – new ways of cooperation
Period ends
Max 60 days
Max 105 days
…………………………………Project runs ………………………………………………………….
Coordinator collects signed financial statements
sent to coordinator
EU check signed financial statements
EU executes Payment
Coordinator sends periodic report with all signed originals to EU
EU check costs
Beneficiaries fill financial statements
EC creates NEF session
Coordinator submits the Periodic Report
to coordinator to access NEF through Participants Portal
EC validates report
yes no 1 2 3 4 5 6
Project review 7
financial statements in PDF format by to the coordinator

12. Periodic reporting Use of Participant Portal/NEF
Contractual reporting requirement
By the Coordinator
By the beneficiaries
Use of NEF
Participant Portal - Getting access: coordinator (submits), beneficiaries (data entry)
Reporting/Payment sessions –several iterations possible;
Commission verifies at this stage whether all information has been received. The eligibility of costs is checked once the progress report has been submitted

13. Periodic reporting Use of Participant Portal/NEF
Advantages
Pro-active management
Re-use rather then re-entry of contractual data
Efficiency
Consistency between data in the grant agreement and data in the financial statement
Improve time to payment
Reduce of errors
Use known mechanism of ‘electronically interaction’ with the Commission

14. Cost reporting @participant level
Financial statement (see guide to financial issues) for each reporting period
Costs
Direct costs
Indirect costs
Receipts
Interest
Certificate on the Financial Statement
Beneficiary’s declaration on its honour
The individual financial statement is also to be used for adjustments to previous periods

15. Financial statement- Costs
Direct costs
Personnel. Persons
Must be directly hired
Work on the sole technical supervision and responsibility of the beneficiary
Be remunerated in accordance with the normal practices of the beneficiary
Subcontracting
Subcontracts may only cover the execution of a limited part of the work (specific conditions for pilot A)
Must be duly justified in Annex I
Recourse to subcontracts may not affect rights and obligations of the beneficiaries regarding background and foreground
Annex I must indicate the tasks to be subcontracted and an estimation of the costs
Other direct costs (travel, durable equipment, consumables, …)
Indirect costs
According to the grant agreement

16. Financial statement In NEF

17. Financial statement – Receipt
Receipt may arise from
Resources made available by third parties by means of financial transfers or contributions in kind which are free of charge
Shall be considered a receipt if contributed specifically to be used on the projects – it is not a receipt if the use is at the discretion of the beneficiary's management
Income generated by the project
Shall be considered a receipt when generated by actions undertaken in carrying out the project and from the sale of assets purchased under the grant agreement – it is not a receipt when generated from the use of foreground resulting from the project
To be declared at each reporting period by each participant – to be accounted for at the end of the project (no-profit!)

18. Financial statement – Interest
Pre-financing remains the property of the Commission until the final payment
The Commission shall recover from the coordinator for each reporting the amount of interest generated when such pre-financing exceeds the amount fixed in the Financial Regulation and its Implementing Rules
Currently the Implementing Rules the amount has been fixed at when the amount of the pre-financing exceeds €
The provision applies only to the share of pre-financing not distributed or distributed late by the coordinator to the other beneficiaries
The share of pre-financing the coordinator uses to implement the project is treated in the same way as the pre-financing distributed to the other beneficiaries

19. Financial statement ‘Other’ in NEF

20. Financial statement ‘Signature’ in NEF

21. Submission of periodic report by the coordinator
One original (paper) and one electronic copy needed (Article II.4(4))
Electronic copies are provided through NEF
Paper copy with all original signatures to be sent by post

22. Submission of periodic report by the coordinator
Action in NEF
Progress report
1. Declaration by the project coordinator
Upload scanned copy of signed declaration (coordinator)
2. Publishable summary
Upload (coordinator)
3. Project Progress
4. Use of resources (only for pilots)
Financial statements and financial certificates
5. Financial statements and Summary financial report*
Fill in online (all)
6. Certificates for Financial Statement
Upload scanned copy (where required)
*simplified for TN

23. Declaration by Project Coordinator
Signed by Coordinator
The periodic report is an accurate description of the work carried out for this reporting period
The project (tick as appropriate)
Has fully achieved its objectives for the period;
Has achieved most of its objectives for the period with relatively minor deviations
Has failed to achieve critical objectives and/or is deviating significantly from the schedule
The public web site is up to date
To the best of my knowledge, the financial statements are consistent with the report on the resources used for the project (only for pilots)

24. Submission of periodic report by the coordinator

25. Business workflow – new ways of cooperation
Period ends
Max 60 days
Max 105 days
…………………………………Project runs ………………………………………………………….
Coordinator collects signed financial statements
sent to coordinator
EC check signed financial statements
EC executes Payment
Coordinator sends periodic report with all signed originals to EU
EC check costs
Beneficiaries fill financial statements
EU creates NEF session
Coordinator submits the Periodic Report
to coordinator to access NEF through Participants Portal
EU validates report
yes no 1 2 3 4 5 6
Project review 7
with forms C in PDF format to the coordinator

26. Payment modalities
Commission has 105 days to evaluate and execute the corresponding payment
No tacit approval of reports
EC will pay interest on late payment
After reception of reports the Commission may
Approve the reports and deliverables, in whole or in part or make the approval subject to certain conditions
Reject giving justification, if appropriate start the procedure for termination
Suspend the time-limit requesting revision/completion
Suspend the payment

27. Payment modalities Pre-financing payment Interim payments
Usually 160% of average period Community contribution
Interim payments
Corresponding to the costs accepted for the period
Payments until the 10% retention is reached
Final payment
Take into account the declaration of receipts at participant level

28. Payment modalities Example
Project
duration 32 months, 3 periods, Union Contribution 3 M€
Pre-financing
average Union Contribution/period = 3M€/3 = 1M€
usually 160% = 1.6 M€
1st Interim payment
suppose 1M€ accepted
payment 1M€
2nd Interim payment
payment 0.1M€ (retention 10%!)
Final payment
0.3M€ (proviso all conditions are met)

29. Certificate on Financial Statement Requirements
Requirement specified in Article II.4(7)
“ … for claims of interim payments and final payments where the cumulative amount of requests for payment by a beneficiary is equal to or superior to € “ *
Auditor performs “agreed upon procedures” and provides report on factual findings
The document “Certification of Financial Statements for ICT PSP projects” specifies compulsory Terms of Reference, procedures and reporting format
The certificate shall certify costs, receipts and interest
* The Commission may request , on the basis of an analysis of risks, the submission of a certificate on the financial statement from any beneficiary at any time until the date of the final payment

30. Certificate on Financial Statement What
Auditors perform a standard set of checks and provide information according to a specific format defined in agreed Terms of Reference (ToR) and give the Commission relevant elements to assess whether costs are claimed in accordance with the ICT PSP grant agreement
ToR are given in ‘Certificate of Financial Statements for ICT PSP projects’ see (
ToR correspond to international audit standards (International Federation of Accountants – IFAC – ISRS 4400)

31. Certificate on Financial Statement Who
Beneficiaries have free choice of external auditor*
External auditors must be Independent and Qualified (Directive 2006/43/CE replacing 8thCouncil Directive)
For public bodies it can be competent public officers if certain conditions are met
Cost of the certificate on financial statements is an eligible cost in the grant agreement
* Services provided by the auditors are regarded as subcontracts and subject to the requirements of best value for money. Beneficiaries shall ensure that the rights of the Commission and the Court of Auditors to carry out audits are extended to the auditors
** Independence ‘in fact and/or appearance’

32. Certificate on Financial Statements When*
Requested EU contribution (cumulative/open amount)< €:
-> No CFS to be submitted (not even at the end of the project)
Requested EU contribution (cumulative/open amount)≥ €:
->CFS every time ≥ €
* and when requested by the Commission

33. Certificate on financial statement Example
Year 1 EU contribution= € : No CFS because < €
Year 2 EU contribution= € : CFS to be submitted (since € € ≥ €)
Year 3 EU contribution= : No CFS because < €
Year 1
Year 2
Final Period
EU Contribution € € €
‘Open amount’ not covered by CFS €
CFS Mandatory NO
YES
(< €)
(≥ €)

34. Certificates on Financial Statement
Submission of certificate
Electronically and signed original
Form of Certificate
A list of minimum requirements required by the Commission to be included in the engagement letter
The model auditor’s report of factual findings to be issued on the auditor’s letterhead and dated, stamped and signed by the auditor (or competent public officer)
A detailed description including the procedures to be performed by the auditor and the findings expected to result there from
The language of the CFS should be written in the language indicated in Article 4 of the grant agreement

35. Certificate on financial statement Procedures to be performed by the auditor
Personnel cost
Recalculate the hourly rate and overhead rates for personnel based on
Actual payroll information and productive hours
Describe time recording
Description of the time-recording system and individual timesheets
Employment status and employment conditions
Specific employment contracts for researchers in question as well as standard employment contracts

36. Certificate on financial statement Use of Average Personnel Costs
Exceptional – only in case the relevant special clause ‘Personnel costs claimed in accordance with normal practices’* is inserted in the grant agreement
In this case the auditor reconciles the following information with the accounting system of the beneficiary
The number of categories
The pay range, median and average of each category
The upper and lower percentage variation from the average (denominator is the average)
The upper and lower percentage variation for productive hours from the average (if known)
A list of average rates charged in each category for the prior years
The FP7 certificate on the methodology is valid for ICT PSP
* ‘A beneficiary may claim personnel costs in accordance with its normal practices provided that the personnel costs determined in this way do not significantly differ from the actual costs incurred’

37. Certificate on financial statement Procedures to be performed by the auditor
Subcontracting – best value for money under conditions of transparency and equal treatment
Matching with Annex I
Contracts signed with 3rd party
Award procedure
Report which describes how the offers were obtained and assessed
Other Direct costs
Allocation of equipment subject to depreciation, travel cost and consumables correctly identified and allocated to the project
Extracts from the accounting records together with original invoices including company policy on travel costs
Indirect costs – to be assessed in case the beneficiary uses actual indirect costs
Review detailed breakdown of indirect costs
Details on the calculation together with a sufficient narrative description of the methodology

38. Certificate on financial statement Procedures to be performed by the auditor
Exchange rates
Use of normal accounting practices
Receipts
Examples include income from events, rebates from suppliers, …
Interest yielded
Coordinator is obliged to use an interest bearing account*
* Unless exemption is approved

39. Controls and audits Financial audits and controls (see Art. II.28)
during the implementation of the project and up to five years after final payment
by external auditors or by the Commission services including OLAF
The European Court of Auditors has the same rights as the Commission
Technical reviews (see Art. II.29)
At any time during the implementation of the project and up to five years after the end of the project.
The Commission may be assisted by external scientific or technological experts

40. Controls and audits
Financial audits to cover financial aspects, systemic aspects and other aspects such as accounting and management principles
Sampling
Risk based
Professional scepticism
Typically carried out by the external audit Unit of DG INFSO
Technical reviews
Typically yearly
Use data mining techniques
Use of external experts

41. Controls and audits
Reimbursement to the Commission and recovery orders (see Art. II.30)
Sums owned to the Commission may be recovered by offsetting
The Commission may adopt an enforceable decision formally establishing an amount as receivable from persons other than States
Penalties (see Art. II.31)
Any beneficiary that has been guilty of making false declarations shall be liable to financial penalties of between 2 to 10% of the value of the Community financial contribution received by that beneficiary. The rate may be increased to between 4 and 20% ..
Beneficiaries may be excluded from all Community grants

42. Some best practices General
Costs claimed must be actual
Use of budgeted, standard, estimated, notional … costs is not allowed
Costs that are not recorded in the accounts* are not incurred
Costs must be properly documented
* In ICT PSP the ‘third party’ concept as there is in FP7 does not exist. Only costs incurred by beneficiaries – who signed the grant agreement – are eligible

43. Some best practices Time recording
Person-based full time-recording system
Per researcher/employee working on projects
Allocating time to the different activities (research, education, management, administration, training, sickness, holidays)
No estimates
Properly authorized.
Why full time-recording system?
To be able to accurately calculate annual productive hours which are the basis for the correct calculation of the hourly personnel rate
To avoid double charging time of the same personnel to several activities/projects

44. Some best practices Time recording
Basic requirements of timesheets
Full name of the beneficiary
Full name of the employee
Title of the project
Project account number
Time period concerned
Amounts of hours claimed on the project
Full name and signature of the supervisor

45. Some best practices Direct personnel
Employment status
Directly hired or
In-house consultants if following cummulative requirements are fulfilled:
Contract to engage a physical person
Work under the instructions of the beneficiary
Work in the premises (except if teleworking agreement and this is common practice for the beneficiary)
Output belongs to beneficiary
Cost in line with normal employment remuneration
Renumeration is based on number of worked hours

46. Some best practices Direct personnel
Hourly personnel rate calculated using a correct number of productive hours
Either using a standard number of productive hours for all employees, or
By calculating an actual individual number of productive hours
A figure of 210 working days – 1680 productive hours is considered representative in most cases

47. Some best practices Average personnel cost
Use of actual and not budgeted or estimated costs
Have a sufficient number of categories
Ensure that the methodology is applied in a fair manner
Only when special clause is in the grant agreement

48. Some best practices Subcontracting
Award of subcontracts must be justified in Annex I
Tasks concerned and estimation of costs must be indicated in Annex I
Subcontractor must be chosen according to the best value for money principle using transparent procedures – if the subcontractor is known the beneficiaries are nevertheless bound to demonstrate that these conditions are complied with
May only cover the execution of a limited part of the work
Invoices must have a reference to the project and provide details of service or supply

49. Payments in ICT-PSP ‘Lump sum’ Thematic Networks
Simplified process based on lump sums
No definition of eligible cost
No actual cost reporting
No indirect cost
No justification of costs
No provision of certificates
No declaration of receipts
Simplified summary financial report by coordinator (declaration of participants having actively participated in the period).

50. Thematic Networks
The implementation will be using a lump sum – scale of unit approach
Scale of Unit "Coordination costs"
Lump sum "Implementation costs"
Lump sum "Attendance of meetings costs"
Coordinator
3.000€ per year and per beneficiary for the first 10 beneficiaries (incl. the coordinator)
2.000€ per year and per beneficiary from the 11th beneficiary on
No additional funding from the 21st beneficiary on
Costs for attendance of networks meetings and network related events are financed by a lump sum of 5.000€ per year per beneficiary
Other beneficiaries
3.000€ per year per beneficiary

51. Payments in ICT-PSP Thematic - Networks

52. Payments in ICT-PSP Thematic - Networks

53. Thematic Networks – Summary financial report